The Oil Drum

241 comments on DrumBeat: March 14, 2007

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tate423 on March 14, 2007 - 12:35pm

Go back to econ classes because fractional reserve banking does not make money cheaper it increases the velocity of the money and how many times it spent. Money is a commodity and it has a price just like everything else and that price is called a discount rate or interest rate.

I agree fractionally reserve banking is egregious, however let's get the facts right.

http://thefinancedude.blogspot.com

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ckaupp on March 14, 2007 - 2:30pm

Yes, it increases the velocity of money. But it also increases the money supply. Increasing the money supply decreases the value of the money in circulation, hence the devaluation of the dollar. That's what I meant by making money cheaper. I just used the wrong term --- it should have been dollar devaluation.

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